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June Market Commentary

Global stocks rallied strongly in June, erasing most of May’s losses. Despite a prolonged U.S./China trade war, increasing tensions in the Middle East and signs of slowing global growth, stocks continue to “climb a wall of worry”. The U.S. stock market had its best start to a year since 1997. The U.S economic expansion became the longest in history in June. Also, the unemployment rate is at its lowest level since 1969. Why all the worry?

One of the biggest investor concerns is the ongoing trade war between the U.S. and China. Regardless of whether you agree or disagree with the administration’s stance toward trade, global industrial growth is slowing. The growth slowdown may simply be the fact we are currently in a long period of economic expansion. On the other hand, trade uncertainty may lead corporations to curtail investment plans until there is better visibility toward the outcome.

Based on current economic conditions, Federal Reserve Chair Jerome Powell pivoted in June to lowering interest rates in the future by commenting the Federal Reserve will “act as appropriate to sustain the expansion”. In addition, at the G20 summit in Japan in late June, the U.S. and China agreed to restart trade negotiations with the Trump administration deciding they will not add new tariffs on $300 billion of Chinese imports. The prospect of lower interest rates and a trade war truce contributed to the strong rally in stocks and bonds in June.

Looking ahead, investors are focused on second quarter corporate earnings to determine how American companies are handling the impact of the trade war and tight labor market conditions. June corporate profit growth is expected to be the weakest in several years, as the benefit of corporate tax cuts has passed, and economic expansion shows signs of slowing. The upcoming Federal Reserve meeting is expected to be an important one as investors are now expecting the Federal Reserve to lower interest rates as early as July.

Our investment team has met with several mutual fund managers over the past few months in order to discuss their outlook on the economy and interest rates. We remain cautiously optimistic that the U.S. economy will continue to grow, but perhaps at a more moderate pace. In addition, we remain focused on buying investments we expect to weather various market cycles. In other words, we are focused on long-term investing and not market timing. While investment returns over the long-term have been very attractive, investors may be convinced to change their asset allocation under certain market conditions.

The end of 2018 was one of those times that encouraged investors to become fearful. However, the strong rally this year highlights strong positive returns can happen just as quickly. Therefore, staying invested long-term in proven investment strategies remains a key to success in managing your wealth.

Our advice is to remain calm during market volatility and to stay cool as the summer heat ramps up! We appreciate the opportunity the serve you and always invite any questions.

Congratulations to Walt!